HR must argue for strategic salary hikes
People Matters|January 2021
Companies often confuse pay reductions with cost reduction. But contrary to popular opinion, pay reductions are more likely to drive costs up or profits down instead. There are other, better ways of achieving the same objective
Jeffrey Pfeffer & M Muneer
HR must argue for strategic salary hikes

Enterprises, and even governments, often seek to hold down the pay of employees in an effort to reduce costs. This effort to reduce costs by cutting pay long predates pandemic “lockdownomics” and won’t disappear when the pandemic ends.

Post 9/11, when the airline industry experienced a large decline in demand for travel, almost all US airlines except for Southwest not only had layoffs, but obtained large wage concessions from their workers. When US-based automakers struggled to turn a profit, they negotiated two-tier wage structures where new employees would make less money. The recession of 2008 accelerated this trend. According to the NYT, pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression. Pay for the average worker remains constrained today, possibly one explanation for the worldwide ongoing financial stress and political turbulence.

But contrary to what many leaders, analysts and HR professionals seem to believe, employees’ rate of pay is not synonymous with labor costs (which reflect not just the rate of pay but also productivity). Moreover, labor costs have little bearing on competitiveness or profitability. Many companies in the IT industry pay very well, but, because of their business models, are extremely profitable. But lower wages do lead to ill health and financial stress, indicators of diminished well-being.

Evidence suggests that if companies paid more, not only would they help their employees but also they would actually help themselves. Here’s the logic.

Higher pay for higher productivity

Denne historien er fra January 2021-utgaven av People Matters.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

Denne historien er fra January 2021-utgaven av People Matters.

Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.

FLERE HISTORIER FRA PEOPLE MATTERSSe alt
How Digital Transformation Can Power The Great Reset
People Matters

How Digital Transformation Can Power The Great Reset

Technology has the potential to serve as the key enabler of change between digitalising administrative tasks and fostering human connections

time-read
4 mins  |
December 2022
The Crypto Meltdown Of 2022
People Matters

The Crypto Meltdown Of 2022

FTX implosion: A setback, but not the end for the crypto market

time-read
3 mins  |
December 2022
Govern Pre-IPO Unicorns to Create Value; Not Valuation
People Matters

Govern Pre-IPO Unicorns to Create Value; Not Valuation

Billion-dollar startups always make the headlines. But is there true value behind those eye-catching valuations? How can proper governance be implemented for these much-hyped companies?

time-read
4 mins  |
December 2022
On change and change management
People Matters

On change and change management

The best way to end the year, especially such a disrupted one as 2022, is by laying the groundwork for the year to come. Michelle Yong, Head of Resourcing at Shell, offers some insights on change management to bring us forward into 2023

time-read
5 mins  |
December 2022
The Great Reconnection: A paradigmatic moment for employers and employees
People Matters

The Great Reconnection: A paradigmatic moment for employers and employees

This year has not been a good one for employee retention. The Great Resignation, originally thought to be a US phenomenon, has emerged in Asia now. But is there a way to turn it into the Great Reconnection?

time-read
4 mins  |
December 2022
Lessons Managing in leadership: a global hybrid team
People Matters

Lessons Managing in leadership: a global hybrid team

What takeaways can we draw from the pandemic? Fatima Koning, Chief Commercial Officer at IWG, shares what the last five years have taught her about managing a global sales team across 120 markets in the hybrid model

time-read
5 mins  |
December 2022
Eight HR trends that we saw throughout 2022
People Matters

Eight HR trends that we saw throughout 2022

As companies manage their workforces in a dynamic era, HR departments have continually adapted and adjusted, and never more than this year as digital acceleration and workplace evolutions came together

time-read
5 mins  |
December 2022
One way to turn the tide of employee retention
People Matters

One way to turn the tide of employee retention

There's a surprising link between skill development opportunities and job satisfaction. Here are some ways of boosting skilling and thereby talent retention

time-read
3 mins  |
December 2022
A key focus for L&D going into 2023 should be business alignment
People Matters

A key focus for L&D going into 2023 should be business alignment

Venkat Subramaniam of Degreed believes that learning is core to business success and organisations need to invest in the right processes and technologies to adapt to continuous change

time-read
4 mins  |
December 2022
WOMEN IN LEADERSHIP CAN BE GAME GHANGER FOR INCLUSIVE FUTURE OF WORK
People Matters

WOMEN IN LEADERSHIP CAN BE GAME GHANGER FOR INCLUSIVE FUTURE OF WORK

BREAKING FREE FROM THE STEREOTYPES IN THE INSURANCE SECTOR, PAMELA THOMSON-HALL SHARES HER JOURNEY OF BEING A CHAMPION FOR WOMEN AND BRINGING ABOUT A CHANGE IN A MALE-DOMINATED INDUSTRY

time-read
9 mins  |
December 2022